Bad loans seems to be a recurring theme. Sweden’s economy, and related exchange traded fund (ETF), is in a vulnerable position as potential loses in Swedish banks are mounting.
Fitch Ratings Ltd. calculates that Swedish bank writedowns for Eastern Europe could cost Sweden 5% of its GDP, even if there is no devaluation in the region’s currencies, report Niklas Magnusson and Aaron Eglitis for Bloomberg. Loan losses reduce the income credits of the current account and would increase the government’s borrowing requirements.
All told, Swebank AB and SEB AB, the largest banks in the Baltics, have loaned more than $48 billion to the region, or respectively 17% and 13% of total loans. The banks will potentially need to write down $21.5 billion to $37.9 billion for this year and the next.
After a series of stress tests, Swedish banks show adequate levels of capital, writes Anna Molin for The Wall Street Journal. But the banking atmosphere is sill steeped with pessimism; as a result, equity investors could insist on banks holding more than the current 7% of Tier 1 capital.
In other news, General Motors (GM) is selling Saab to the Koenigsegg Group, a new firm that is backed by Norweigian and U.S. investors, according to Reuters. Founder Christian von Koenigsegg is fairly optimistic about Saab earning a positive cash flow after 2010 and he will be reshaping the company for the long-term.
- iShares MSCI Sweden Index (EWD): up 16% year-to-date
For more information on Sweden, visit our Sweden category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.